Covenant Not to SueAn Environmental Program Fact Sheet

Purpose

A covenant not to sue is a tool that provides comfort to a prospective purchaser or property owner of a polluted site that, in certain circumstances, the Commissioner of the Connecticut Department of Energy & Environmental Protection (DEEP) will not institute a claim against a party who intends to clean up such property.

Details

A covenant not to sue is an agreement by the Commissioner that the Commissioner shall release claims that are related to pollution or contamination on or emanating from the property, which contamination resulted from a discharge, spillage, uncontrolled loss, seepage, or filtration on such property prior to the effective date of the covenant.

In order to realize this benefit, the property must be remediated in accordance with the Department's Remediation Standard Regulations (RSRs) in effect on the effective date of the covenant, and any environmental land use restriction necessary to comply with the RSRs must be recorded on the land records and must remain in effect.

Authorizing Statutes

Connecticut General Statutes (CGS) sections 22a-133aaand 22a-133bb. Section 22a-133cc of the CGS requires any person seeking a covenant not to sue to submit sufficient information to the Department to allow the Department to make the determinations required.

What Is Needed To Obtain a Covenant

The Commissioner may enter into a covenant not to sue with any prospective purchaser or owner of contaminated real property provided the Commissioner approves a:

Remedial action plan that will be used to bring the property into compliance with the RSRs;

There are two covenants not to sue. One is instituted pursuant to section 22a-133aa of the CGS and one pursuant to section 22a-133bb of the CGS.

Section 22a-133aa covenants. The Commissioner will not require remediation of previously unknown contamination that is the result of a release that predates the effective date of the covenant and is determined to exist after the remediation is deemed complete.

A remediation is deemed complete when the Commissioner has approved the remediation or a licensed environmental professionalís verification that the remediation of the property is complete and the Commissioner has either decided an audit is not warranted or the verification has survived the audit process.

Section 22a-133aa covenants are transferable to a party not responsible for polluting the property that is a successor of the holder of a covenant issued pursuant to section 22a-133aa of the CGS. A covenant not to sue with a lending institution may be effective with respect to a successor in interest to the original lending institution so long as such successor is not a party responsible for polluting the property.

The Commissioner will not require additional remediation in the future even if the remediation standards change.

Section 22a-133bb covenants. The Commissioner will not require additional remediation in the future even if the remediation standards change.

Benefits for Designated Brownfield Sites

Covenants can be approved early in the process as long as the Commissioner has approved a brownfield investigation plan and remediation schedule.

The Commissioner can approve a fee payment schedule when there is an approved a brownfield investigation plan and remediation schedule.

There is no fee for covenants issued in connection with a remediation project conducted under section 22a-133m or for covenants issued to municipalities, municipal economic development agencies, or nonprofit economic development corporations formed to promote the common good, general welfare, and economic development of a municipality that is funded, either directly or through in-kind services, in part by a municipality and such corporation's officers and directors.

Who Is Eligible

The Commissioner of DEEP may enter into a covenant not to sue with a:

prospective purchaser of contaminated property,

current owner of contaminated property,

lending institution to whom such prospective purchaser or owner has conveyed a security interest in such property, or

successor of the holder of a covenant issued pursuant to CGS section 22a-133aa.

A covenant not to sue with a lending institution may be effective with respect to a successor in interest to the original lending institution.

An entity responsible for causing the contamination is not eligible for a covenant not to sue.

Certification of Pollution Responsibility and Reuse Intent

A prospective purchaser or current owner requesting a covenant not to sue must demonstrate that they did not cause the contamination, that they have no affiliation with the person who caused the contamination, that they will redevelop the property for productive use or will continue productive use of the property, and that the property has or will be remediated.

For a covenant not to sue issued pursuant to CGS section 22a-133bb, either the Department must approve the cleanup plan or final remedial action report, or a Licensed Environmental Professional must approve the cleanup plan or final remedial action report or verify that the property has been remediated in accordance with the RSRs. A lending institution must demonstrate that it has no responsibility for the contamination on the property.

What a Covenant Does Not Do

A covenant not to sue does not bar damage claims which may be brought by third parties. It does not relieve anyone from responsibility for cleaning up new releases of oil or hazardous substances that occur after the covenant takes effect. A covenant not to sue does not prevent the Department from requiring further remediation of the property if the information provided by the person seeking the covenant was false or misleading. A covenant not to sue entered into pursuant to CGS section 22a-133bb does not prevent the Department from requiring additional action if new information confirms the existence of previously unknown contamination of the property which resulted from a release prior to effective date of the covenant, or if the threat to human health or the environment is increased beyond an acceptable level due to substantial changes in exposure conditions at the property.

Fees Required

A prospective purchaser or owner receiving a covenant not to sue pursuant to CGS section 22a-133aa must pay 3 percent of the value of the property; the property must be appraised as if uncontaminated. Fees are payable when the covenant not to sue is issued by a bank check or money order made payable to the Department of Energy & Environmental Protection.

The Commissioner can approve a fee payment schedule when there is an approved a brownfield investigation plan and remediation schedule.

No fee is required for the following circumstances:

section 22a-133bb covenants;

covenants issued to a successor in interest to the original covenant;

covenants issued in connection with a remediation project conducted under section 22a-133m; or

covenants issued to municipalities, municipal economic development agencies or nonprofit economic development corporations formed to promote the common good, general welfare and economic development of a municipality that is funded, either directly or through in-kind services, in part by a municipality and such corporation's officers and directors.

The Department has developed application forms for requesting a covenant. The appropriate form must be filled out in its entirety and submitted to the contact address below.

Contact Information

This overview is designed to answer general questions and provide basic information. You should refer to the appropriate statutes for the specific language. It is your responsibility to comply with all applicable laws. The information contained in this fact sheet is intended only to acquaint you with the covenant not to sue process and does not constitute the Department's interpretation of the applicable laws.